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Collector settles out of court over works she say were on-sold without permission.

A wealthy Auckland interior designer allegedly swindled out of a US$2.5 million Picasso has settled out of court, the Herald can reveal.

Stephanie Overton, ex-wife of multimillionaire beer baron Sir Douglas Myers, launched legal action in New York after claiming to have fallen victim to a high-profile art dealer's scam.

She said that masterpieces by Pablo Picasso, Marc Chagall, Amedeo Modigliani, Raoul Dufy, Henry Moore and Tom Wesselmann had been used in dodgy deals by English dealer Timothy Sammons.

Legal documents filed with the US District Court Southern District of New York, seen by the Herald, alleged that Sammons was running a "Ponzi scheme" where he deceived owners of valuable art into believing that he would sell them, or hold them, on their behalf.

"Sammons would then sell or borrow against the artworks and use the money for himself and his family including, [at least once], to pay for a jet to travel to a beachfront home in South Africa," the complaint alleged.

Another New York art market player, Andrew Rose, was alleged to have offered Sammons loans worth hundreds of thousands, with the artworks put up by Sammons as collateral.

Rose is also alleged to have "purchased" four of Overton's artworks from Sammons, who had no authority to sell them, for "low prices in undocumented transactions" in the "hope that the work would be sold and the proceeds paid to cover purported loans and the extraordinary fees and expenses that Rose's companies charge".

It was against Rose - formerly of both Sotheby's and Christie's auction houses - and his companies that Overton pursued legal action.

She sought the return of the artworks by some of the world's most recognisable artists and at least $2m in compensation.

But now, the Herald can reveal that the case, which was destined for a jury trial, was settled "pursuant to a court-ordered stipulation" last October.

Overton and Myers collected a number of valuable pieces of fine art during their marriage in the 1970s and 1980s.

When they split amicably in the mid-1980s, Overton received sole title to all of the works, which included one of Picasso's Buste de Femme paintings, Chagall's Reverie, Modigliani's Caryatid, Dufy's Syracuse, Moore's Reclining Nude, and Wesselmann's Collage Study for the Mouth, No. 10.

"Overton held the works both for her aesthetic enjoyment for herself, as well as for her three children, and potentially as assets that could provide financial security in her later years," the statement of facts says.

In 2008, on the advice of her ex-husband, she consulted Sammons about the possible sale of an artwork.

He found a buyer for her and over the next five years, Overton kept in contact with the art merchant.

After moving to a Devonport beachfront mansion, storing the fine art so close to the sea became an issue for specialist insurers.

She moved some of the works to a gallery while Sammons allegedly offered to hold and insure all of Overton's works in London. He is also said to have offered to have reproductions of the art made so that Overton could be reminded of them at home.

At no time did Overton authorise Sammons to transport the works to the United States, or use them as collateral or security for loans, or to sell them, the court documents say.

But Sammons allegedly used the artworks as collateral to obtain large loans from Rose.

Christie's auction house had reportedly advised that it could sell the Picasso work in a private sale for US$2.5m ($3.5m).

However, it was allegedly sold for US$1.6m, with Rose's company said to have received US$1.55m and Sammons US$50,000.

The court documents state: "Overton cannot recover the Picasso work from its current owner, whom she has been advised is a good faith buyer."

Overton had sought to recover the artworks as well as the losses she suffered, "including more than $2m she has lost from the sale of her Picasso that, despite the bargain basement price, unjustly enriched Rose and his companies by more than $1.55m".

When contacted by the Herald at her Devonport home this week, Overton refused to comment on the settlement, including whether she had successfully retrieved her beloved artworks.

"I'm not going to be talking about that," she said.

Her New York lawyer John R. Cahill confirmed all parties are subject to a confidentiality agreement.

Sammons, a former expert at top auction house Sotheby's, was reported in 2015 as being sued in the UK's High Court by the family trust of legendary high street retailers WH Smith.

The trust was reportedly trying to recover a 1.6 million painting by Venetian landscape artist Canaletto that Sammons allegedly sold and failed to pass on the proceeds.

Sammons, who brokered the sale of John Singer Sargent's painting Cashmere to the Bill Gates Foundation for a record-breaking 6.7 million in 1996, and was a well-respected agent for UK aristocrats, had assets worth 7m frozen by the High Court in 2015 and his company, Timothy Sammons Limited, made bankrupt.

Pablo Picasso, one of the greatest and most influential artists of the 20th century, spent much of his life producing paintings that explored the female form. The Buste de Femme works occasionally surface at auction but prices can vary.

In 2015, a Buste de Femme (Femme a la resille), painted in Paris in 1938 (pictured left) at the height of his relationship with photographer Dora Maar, was sold at Christie's in New York for US$67.365 million ($93.9m).Last year, a Buste de Femme piece painted in February 1965, was sold at Sotheby's in London for £1.325m ($2.3m)